Paulo Rebêlo
Wired News
January 2001

In an attempt to bridge the country’s digital divide, the Brazilian Congress last week approved a bill that would ease the tax burden of technology companies so they could sell their products at a lower cost.

Backers of the bill say more people could afford to buy the technology, thus accelerating the drive to modernize the country. In addition, technology companies must donate 5 percent of their profits to public universities.

President Fernando Henrique Cardoso has until Jan. 20 to sign into law “A Lei Informatica” — the “Computer Law” — which gives computer hardware, software and cell phone manufacturers a 95 percent discount on the industrialized products (IPI) tax to produce their goods.

“Without the IPI exemption, the industry will have to incorporate the tax to the product’s final price, which would imply a higher cost to consumers,” said Carlos Salgado, a director at Compaq in Brazil.

However, not all Brazilians praised the Congress’ action. Officials in the northern Amazonas region reportedly have plans to take São Paulo to the Supreme Court out of fear that the new law would lure away Amazonas’ technology businesses.

The Amazonas state is the home of the Amazon.

Before the introduction of the computer law, only the Amazonas capital Manaus was entitled to lower taxes and reduced costs for production. Because of the special treatment, its economy has benefited from a healthy dose of technology companies.

Manaus officials worry companies will relocate to the more populous and bustling São Paulo.

“Companies won’t come to Brazil if São Paulo is not a beneficiary state,” said José Aníbal, science and technology secretary for the state of São Paulo. “It has the best location and human resources in the country.”

But the Amazonas region would still tout special treatment other states wouldn’t receive under the computer Law.

Companies in Manaus would receive a 97 percent discount on the IPI tax in 2002, with the discount gradually reduced and eventually eliminated in 2013. Companies in all other regions would receive a 95 percent discount, which would be gradually reduced and eventually eliminated in 2009.

“The region will keep total exemption of taxes in 2001, while the southern regions will have only a gradual reduction,” said Amazonas Sen. Paulo Souto.

But most officials agree: The time is right for the government to address the issue that the average Brazilian cannot afford to own a computer. In a country where the minimum wage is equivalent to $90 a month, a Compaq computer, for example, goes for $1,500.

Brazilian students are also expected to benefit from the law, since technology companies are mandated to give 5 percent of their profits to public universities.